Northern Arc Capital IPO day 1: GMP, subscription status, review, other key details. Apply or not?

Northern Arc Capital IPO: Retail loan provider Northern Arc Capital's initial public offering (IPO) will open for subscription on Monday, September 16, and will remain open until Thursday, September 19. The mainboard IPO aims to raise ₹777 crore, consisting of a fresh issue of ₹500 crore and an offer for sale (OFS) of ₹277 crore.

Meanwhile, the non-banking financial company (NBFC) raised ₹229 crore from anchor investors ahead of its IPO. The company allotted 87.02 lakh shares to 15 funds at ₹263 apiece, aggregating ₹229 crore.

SBI General Insurance Company, SBI Life Insurance Company, Reliance General Insurance Company, Kotak Mahindra Life Insurance Company, Goldman Sachs (Singapore) Pte, Societe Generale, and Quant Mutual Fund were among the anchor investors.

Northern Arc Capital IPO subscription status

According to BSE data, by 4 pm on Monday, the first day of subscription, the Northern Arc Capital IPO had seen an overall subscription of 2.47 times.

The portion reserved for retail investors was subscribed 3.49 times, while the non-institutional investors' category had seen a subscription of 3.51 times. The QIB segment of the issue was subscribed 0.01 times by that time.

Northern Arc Capital IPO key details

As the mainboard issue opens for subscription today, let's take a look at the 10 key details of the Northern Arc Capital IPO:

1. Northern Arc Capital IPO GMP: According to stock market sources, the current grey market premium (GMP) of the Northern Arc Capital IPO is ₹165. The GMP indicates investors are positive about the stock in the grey market. Considering the current GMP trend, the company's shares are expected to be listed at a premium of 62.74 per cent at ₹428 on the Indian bourses.

2. Northern Arc Capital IPO price band: The issue's price band has been set at ₹249 to ₹263 per share.

3. Northern Arc Capital IPO date: The mainboard IPO is opening for subscription today (Monday, September 16) and will conclude on Thursday, September 19.

4. Northern Arc Capital IPO size: The issue combines a fresh issue of 1.9 crore shares and an offer for sale (OFS) of 1.05 crore shares. The company wants to raise ₹777 crore from the IPO. It will raise ₹500 crore from the fresh issue of shares.

5. Northern Arc Capital IPO lot size: The minimum lot size for an application is 57 Shares. With the issue's upper price band at ₹263, the minimum amount of investment required by retail investors is ₹14,991.

6. Northern Arc Capital IPO allotment date: After the completion of the IPO subscription process, the company is expected to finalise the share allotment on Friday, September 20. Successful applicants will likely get the shares credited to their demat accounts on Monday, September 23, while those who do not receive an allotment may expect refunds to be processed on the same day.

7. Northern Arc Capital IPO registrar: Kfin Technologies Limited is the official registrar of the issue.

8. Northern Arc Capital IPO listing: The company's shares are proposed to be listed on the BSE and the NSE tentatively on Tuesday, September 24.

9. Object of the issue: According to the company's RHP, it wants to use the net proceeds from the issue to "meet future capital requirements towards onward lending."

10. Company overview: According to the RHP, the company provides retail loans to under-served households and businesses in India.

"Our three primary channels: (i) lending, (ii) placements, and (iii) fund management provide access to credit to the under-served categories of India across our focused sectors," says the RHP.

The company reported a profit of ₹181.94 crore for FY22, which rose to ₹242.21 crore in FY23 and ₹317.69 crore in FY24.

Northern Arc Capital IPO: Apply or not?

Experts appear largely positive about the issue, mainly due to valuation comfort.

Prathamesh Masdekar, a research analyst at StoxBox, has a 'subscribe' view on the issue.

"We recommend a 'subscribe' rating for the issue on the back of a differentiated credit underwriting process, which keeps their asset quality strong and risk-adjusted returns consistent across business cycles," said Masdekar.

Masdekar pointed out that the company's differentiated credit underwriting processes and risk models have helped deliver strong asset quality.

"According to the CRISIL Report, the company had one of the lowest gross non-performing assets (GNPA) of 0.45 per cent and net non-performing assets (NNPA) of 0.08 per cent as of FY24. The issue is valued at a P/BV of 1.49 times the upper price band based on the FY24 book value, which is fairly valued," Masdekar observed.

Anshul Jain, the head of research at Lakshmishree Investment and Securities, said Northern Arc Capital's IPO presents an interesting investment opportunity, particularly for those seeking short-term gains.

"The company's strong financial performance, coupled with its strategic positioning in the growing Indian credit market, makes it a promising candidate for listing appreciation," said Jain.

Jain underscored that with a three-year average ROE of nearly 12 per cent and a gross NPA of 0.6 per cent, Northern Arc has demonstrated its ability to generate consistent returns while maintaining healthy asset quality. The company's AUM and profit after tax have grown at a commendable pace, indicating its strong growth trajectory.

On the valuation front, the stock's valuation appears attractive to Jain compared to its peers, with a P/E and P/B ratio of 13.3 and 1.5, respectively.

"The rising demand for credit and the ongoing shift towards more organized lenders in underpenetrated markets are expected to drive further growth for Northern Arc," said Jain.

"However, it's essential to acknowledge the competitive threats posed by larger NBFCs and banks. While Northern Arc's diversified loan book and robust asset quality provide a degree of protection, the company's smaller scale could limit its ability to compete effectively in the long run. For investors seeking short-term listing gains, Northern Arc Capital's IPO presents a promising opportunity. However, it's crucial to conduct thorough due diligence and consider the potential risks before making any investment decisions," said Jain.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.